Food and grocery suppliers warn of looming pallets shortage

Food and grocery suppliers have warned the federal government and ACCC about a looming pallets shortage that could threaten the delivery of consumer goods.

Industry insiders fear the nation faces a pallet crisis after Christmas as many suppliers are failing to get enough pallets from the national pool to transport their goods.

A looming pallet shortage that could threaten the delivery of food, groceries and medicines to retailers has prompted the nation’s peak representative for food and grocery suppliers to sound the alarm with competition tsar Gina Cass-Gottlieb and the Albanese government.

Industry insiders fear the nation faces a pallet crisis after Christmas as many suppliers are failing to get enough pallets from the national pool to transport their goods, while many pallets are breaking through overuse and taking too long to repair.

Australian Food and Grocery Council chief executive Tanya Barden last month raised the problem with newly appointed Australian Competition & Consumer Commission chair Ms Cass-Gottlieb.

Ms Barden’s AFGC has also alerted the office of federal Industry Minister Ed Husic to the growing danger to supply chains of the dwindling pallet pool. Many suppliers are struggling to get pallets to send their products to retailers such as supermarkets and pharmacies.

The federal government’s Office of Supply Chain Resilience, created in 2021 to focus on critical supply chain vulnerabilities that affect Australia’s national interest, is aware of the rising anxiety in the $133bn food and grocery sector from a shrinking pallet pool that threatens deliveries of most fast-moving consumer goods – from toilet paper to headache tablets.

And Ms Barden has come out swinging against the world’s largest pallet supplier, CHEP – owned by industrial giant Brambles – for failing to invest to increase the pool of pallets available at a time when demand has been rising for years.

Australian Food and Grocery Council CEO, Tanya Barden, has raised the alarm of a looming pallets shortage with the federal government, the ACCC and the Office of Supply Chain Resilience. Picture: Nikki Short

“I think CHEP has fundamentally misread the demand for pallets in the market,” Ms Barden told The Australian.

“About 70 per cent of pallets are used in fast-moving consumer goods, to move products along the supply chain, and the pallet pool has been broken for about the last 12 months.

“Companies are only receiving about 10 to 15 per cent of their pallets from the poolers, CHEP and Loscam.”

CHEP Australia general manager Lis Mannes told The Australian on Sunday that in the past two years, CHEP had engaged on an ongoing basis with customers to discuss their pallet needs, and had invested more than $100m during this period to increase its pallet pool.

“There are now materially more CHEP pallets in the market than this time last year, more than pre-pandemic, and more than in CHEP’s 70-year history,” Ms Mannes said.

She said in the six months to Christmas 2022, CHEP was on track to add as many new pallets to its pool as it would usually do in a full year, and it would further increase the size of its pallet pool in 2023.

Pallets, typically made from wood, are the unsung heroes of the global supply chain around the world.

A range of issues since the outbreak of Covid-19 have constricted and disrupted the supply of these pallets.

These include shortages of wood and workers to make and repair pallets, the skyrocketing price of timber since the outbreak of the war in Ukraine, and more recently legal action by environmental activists to halt logging in key local forests that are a crucial source of pallet wood.

“Supply chains are fundamentally operating differently to what they have in the past, and so the demand for pallets is higher because of all that uncertainty. And unfortunately we think the pallet poolers have left it late to invest in supply into the Australian market,” Ms Barden said.

The Office of Supply Chain Resilience is aware of the rising anxiety in the $133bn food and grocery sector from a shrinking pallet pool that threatens deliveries of most fast-moving consumer goods. Picture: Bloomberg

“They have fundamentally misread the high level of demand, thinking that it would improve when the reality is the disruptions are still ongoing.

“And we are really at a point where things are very difficult and I don’t believe they are just going to be resolved on the other side of Christmas.”

There are reports of her food and grocery supplier members slowing down production because they don’t have the pallets to hold newly manufactured goods, or suppliers being forced to invest millions of dollars in extra staff and resources to maintain their own pallets.

Ms Barden confirmed she had spoken directly to Ms Cass-Gottlieb at the ACCC, Mr Husic’s office and the Office of Supply Chain Resilience to raise the concerns of food and grocery suppliers about the pallet shortage and to determine whether the government could intervene in some way to alleviate the problem.

“I think we are really seeing a market failure at the moment and there is a need for an injection of more pallets into the pool, so there is a question as to whether state or federal governments are able to collaborate to firm up some timber supplies or pallet supplies, and that is part of the discussions we are having,” Ms Barden said. “There is a market here that is not working effectively.”

An ACCC spokeswoman confirmed the regulator was aware of the pallet shortage issue.

“There have been a range of media reports about shortages in the pallet sector. The ACCC will continue to engage with key stakeholders on this issue.”

A spokesman for Mr Husic’s department also said it would engage with stakeholders on the pallet issue.

“The Department of Industry, Science and Resources is aware of industry representations regarding pallet availability,” he said. “The department continues to engage with all relevant stakeholders on the matter.”

ACCC chair Gina Cass-Gottlieb has been made aware of the looming pallets shortage by food and grocery suppliers. Picture: NCA NewsWire / Christian Gilles

A pallet shortage first emerged in the early stages of the pandemic and, in late 2021, Coles chief executive Steven Cain warned of the critical nature of pallet shortages, dubbing the crisis “pallet-gate”. He was joined by Woolworths boss Brad Banducci, who said the shortage of pallets was slowing the delivery of products and causing bottlenecks in the supply chain. A spokesman for Woolworths on Sunday said it appreciated the concern pallet shortages were causing across the food and grocery sector.

“We have been balancing a high volume of requests from suppliers to return pallets to them directly, while also contributing hundreds of thousands of pallets back into the pool for maintenance and wider availability across the industry every month,” he said.

“We have indicated to the federal government that we are committed to being part of an industry solution and this includes returning more pallets to the pool.”

In October Coles acted to inject more pallets into the channel between it and its suppliers.